McDonald's 'cheap coffee' could be stealing customers from Starbucks when it needs them most

McDonald’sMcDonald’s has launched new drinks that seem similar to Starbucks’ offerings.
  • McDonald’s could be cutting into Starbucks‘ sales, according to a note from Bernstein analysts.
  • The fast-food chain seems to be winning over customers in the afternoon with “more food options and cheap coffee.”
  • Starbucks has struggled to grow afternoon sales, killing its well-known Frappuccino Happy Hour deal that aimed to drive traffic after 3 p.m.

It’s looking a lot like McDonald’s is stealing Starbucks customers.

In a note to investors, Bernstein analysts said that McDonald’s may be taking share away from Starbucks.

However, the fast-food chain isn’t necessarily stealing the customers looking for a cheap cup of coffee in the morning. Instead, McDonald’s is winning over afternoon customers.

“There is some evidence that MCD – with more food options and cheap coffee – is taking pm traffic from SBUX (and DNKN),” analyst Sara H. Senatore writes.

Negative afternoon traffic is Starbucks’ biggest problem, Senatore says. Competition is more intense in the afternoon, and customers are less loyal and more cost-conscious.

McDonald’s has recently been ramping up efforts to win over coffee drinkers who may otherwise visit Starbucks.

Over the last year, the chain has launched new espresso-based drinks at significantly cheaper prices than Starbucks’ counterparts. Currently, the fast-food giant has a deal that allows customers to purchase any small McCafĂ© drink for $US2.

Starbucks has long set its sights on growing afternoon traffic. In years past, the Frappuccino Happy Hour has been a major sales driver after 3 p.m. in summer months. However, Starbucks canceled the deal this year, with executives saying it had not been profitable for the two prior years.

Instead, Starbucks brought back a new version of Happy Hour across the US in March. The new Happy Hour features a shifting range of deals, with customers being alerted via apps and email of the promotions of the day.

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